FloridaFuture
February 19th, 2008, 11:34 PM
New Hyatt resort provides ownership alternative
By Aaron Kessler
Published Monday, Feb. 18, 2008 at 4:30 a.m.
SIESTA KEY — Watching through the chain-linked fence as dump trucks hauled away the remnants of what had been the Sea Castle resort, Terry Shelling sat on a blue bicycle and reminisced about days gone by.
For nearly a decade, Shelling and his wife had stayed 10 weeks each year in a second-floor beachfront room at the Sea Castle on Siesta Key, spending lazy days overlooking one of the most beautiful beaches in the world. It was only steps to the legendary white sands and the Gulf of Mexico's smooth water that extends toward the horizon.
"You can't get any better than this," he said. "It really is the perfect spot; I'm certainly going to miss it."
Shelling was lucky enough this year to snag a rental condo at a nearby property, though he said it will not quite hold the same place in his heart as the old Sea Castle -- now, no more.
Instead, a planned Hyatt beach resort is hoping to bring a new, lucrative set of vacationers to this special spot.
The $100 million, 44-unit project will be the first of its kind in the Sarasota area to be built as a so-called "fractional ownership" property: part time-share, part condo, part hotel.
The cost? Six weeks each year are yours for between $250,000 and $750,000, plus additional yearly fees.
"Though it can be viewed by the consumer as an alternative to buying a condo, it's really put together quite differently," said Larry Shulman, senior vice president of Hyatt Vacation Ownership.
Getting more for your money?
Shulman said with the average owner of a second home only using it for 21 to 47 days a year, fractional ownership provides a way to get more for your money without the hassle of year-round maintenance and the prospect of constantly renting out the place.
He said an important distinction between normal condominiums and fractional ownership is that the latter is "designed for use" by buyers.
"In a conventional condo project, there is a lot of investment angle to the purchasing, with people attempting to resell their units for a profit and who have no intention of actually living there," Shulman said.
He said people buy fractional properties generally because they love the place and want to vacation there on a regular basis.
"Rental income is incidental not fundamental, you could say," he said.
What is more, fractional ownership properties are developed differently than conventional condos -- a distinction that may be crucial to the Hyatt Siesta Key Resort's ability to move forward in such a distressed housing market.
"The typical condo project does involve significant presales," said Brent Virkus, president of Triton Companies, the developer. "But this isn't the type of development where you look for presales -- it's more of a usage decision by buyers. They really get interested when they see the thing come out of the ground."
Coming out of the ground these days is not a small feat.
A number of Sarasota condo projects are on ice, with several others circling the bowl. Part of the reason: Financing is extremely difficult to secure in the current environment. Lenders want to see 50 percent or more of the condo units presold before they will part with their money -- a very high bar to be met by most developers right now.
Lots of product
Wealthy buyers with money to burn can look at the Sarasota skyline and see a number of existing options. Last month as a whole, 4,600 condos were listed for sale on the Sarasota Multiple Listing Service.
So second home hunters can plunk down some cash, sign a contract, and move in next week. The problem new developers face is persuading those people to instead buy into the promise of a condo years down the road. If they cannot get enough contracts signed, they cannot get the financing to build in the first place.
The Hyatt project on Siesta Key would bypass this construction conundrum entirely -- or so the partners involved hope. That is because the majority of the construction money is coming from Wall Street.
Private equity firm The Carlyle Group, with more than $58 billion in assets worldwide, is a partner in the deal -- providing an undisclosed portion of the $100 million price tag.
New York-based real estate investment trust iStar Financial also recently signed on to a provide a $28 million loan for the project.
More money is being provided by still-undisclosed Wall Street investment banks and others, meaning the developers can simply move forward now and avoid waiting for presales.
"The money is there to make this happen," Shulman said. "We're doing it."
More like a hotel
The idea is to develop the project more like a hotel than a strictly residential property. Hotels traditionally involve lots of upfront construction costs, and take several years to become profitable.
It is a gamble that could pay off handsomely if they succeed, but wind up costing millions of dollars in losses if they do not.
Virkus said he is confident the project will be a success.
"There's always a risk to everything, but we're confident enough to put our money at stake here," he said.
While he declined to provide a specific number, Virkus said Triton's share of the cost would be "well over seven figures."
Triton did not initially plan to go the fractional ownership route.
When the project was first conceived during the boom, the white sands of Siesta Key seemed like the perfect place for upscale condominiums. Times were good -- Sarasota condos were selling like they were going out of style. But when the bottom fell out of the market, everything changed. Triton was faced with a choice: Adapt or throw in the towel.
About a year ago, Virkus said the process began to reimagine the project. No longer would traditional condos be in the mix, but instead a relatively new form of vacation residence that combines a time-share philosophy with an ownership mentality: so-called "fractional ownership."
The concept has been pioneered by several high-end chains such as Hyatt, Marriott and others who have traditionally played in the time-share game.
But what makes "fractional ownership" different is that buyers actually own a piece of their vacation property -- they hold a deed, pay property taxes and do all the traditional things homeowners do. (In traditional time-shares, a buyer might just own a membership, or sometimes nothing at all).
In fractional ownership, the buyer owns a piece of the unit. They own a quarter, an eighth, or a 12th of their unit. They can benefit from appreciation in a rising market, and get tax benefits as well. Of course, they also face the prospect of lowering values in a falling market.
Another aspect of fractional ownership has been to pull out all the stops to create multimillion-dollar residences that will whet the appetite of individuals looking to get more vacation home for their money.
'High-end product'
Architect Gary Hoyt has approached the Hyatt Siesta Key as "a very high-end product" that would aim for a peaceful, relaxed atmosphere.
"I tried to bring the beach right into the building, with a lot of very open, airy spaces," Hoyt said.
In addition to the rooms themselves, the current design calls for a beach club complete with a spa that will be partially inside and partially outside the building.
A desirable destination, and the image of exclusivity, has helped drive sales of similar projects elsewhere in the country. Hyatt has targeted retreats for the wealthy such as Aspen, Colo., where it built a 50-unit fractional ownership property that opened in December 2005.
Of course, going fractional means more buyers to sign -- in the case of the Hyatt Siesta Key, 44 units with eight owners each will mean more than 350 total buyers who must step forward.
Shulman said the partners involved in the project estimate that it will likely take at least two years, and perhaps as many as four or five years, to sell all the units. He said all involved are "in it for the long haul."
"There are various degrees of return," Shulman said. "We've looked at whether if it took two years, or perhaps four or five years, what the return would be ... and we were comfortable with those numbers."
Hyatt opened its sales office in downtown Sarasota last week. Shulman said they will start out by focusing on selling the first 11 residences, or 88 buyers, and will roll out some special incentives to help prime the pump.
Shulman said the project will try to target both ends of the geographical spectrum -- from international marketing in England and Germany, to a local push focusing on Florida residents already living within two hours of Sarasota.
"We think there's a lot for people already living in this area to like" about the project," Shulman said.
To attract local buyers, Hyatt will likely be offering complimentary access to the beach club year-round for owners, whether or not they were staying there. He said that incentive may only be available to the first round of 88 buyers, but could be extended if it proves successful.
There is also talk of offering a half unit, or three weeks instead of six, during the off-peak summer season, for a price in the $170,000 range.
The other strategy to bring in money is to rent out the unsold units. Once the resort opens in 2009, Shulman said the unsold inventory will not simply sit idle -- it will be rented out to owners of other Hyatt vacation club properties, as well as to the general public looking for a quality beach vacation resort.
He said the minimum stay for the general public has not yet been decided, but that a full-service reservations staff will be available to help match up interested parties with available rental units.
The Hyatt Siesta Key, then, will for all practical purposes resemble a beach resort hotel -- and Shulman said Hyatt hopes to achieve a 70 percent occupancy rating over the next several years while the sales process is ongoing. (Seventy percent is widely used as the target for luxury hotel properties).
This approach is not without its own double-edged potential. By opening the resort to a wide spectrum of rentals during its initial years, the money coming in will help the offset the cost of the unsold inventory. But at the same time, the aura of exclusivity could be diminished in the eyes of potential buyers.
Shulman said the Hyatt expects the building will be ready for occupancy by April 2009.
Sarasota commercial real estate broker Ian Black said the most important thing for a project like the Hyatt Siesta Key comes down to "location, location, location" -- and that a slice of beachfront property on Siesta Key certainly qualifies as a special place. Add a hefty dose of luxury and pampering, and people can be drawn to the overall lifestyle being offered.
"It's the kind of thing that works more as an emotional decision," Black said. "Do I get a great financial deal with fractional? Maybe not. But do I enjoy it and love coming here? That's what it's about."
Black himself actually owns a one-week time-share membership at a Hyatt Resort in Bonita Springs.
"It's great; I really look forward to going down there every year."
Last modified: Monday, Feb. 18, 2008 at 2 a.m.
http://www.heraldtribune.com/article/20080218/BUSINESS/802180354/1537/BUSINESS
By Aaron Kessler
Published Monday, Feb. 18, 2008 at 4:30 a.m.
SIESTA KEY — Watching through the chain-linked fence as dump trucks hauled away the remnants of what had been the Sea Castle resort, Terry Shelling sat on a blue bicycle and reminisced about days gone by.
For nearly a decade, Shelling and his wife had stayed 10 weeks each year in a second-floor beachfront room at the Sea Castle on Siesta Key, spending lazy days overlooking one of the most beautiful beaches in the world. It was only steps to the legendary white sands and the Gulf of Mexico's smooth water that extends toward the horizon.
"You can't get any better than this," he said. "It really is the perfect spot; I'm certainly going to miss it."
Shelling was lucky enough this year to snag a rental condo at a nearby property, though he said it will not quite hold the same place in his heart as the old Sea Castle -- now, no more.
Instead, a planned Hyatt beach resort is hoping to bring a new, lucrative set of vacationers to this special spot.
The $100 million, 44-unit project will be the first of its kind in the Sarasota area to be built as a so-called "fractional ownership" property: part time-share, part condo, part hotel.
The cost? Six weeks each year are yours for between $250,000 and $750,000, plus additional yearly fees.
"Though it can be viewed by the consumer as an alternative to buying a condo, it's really put together quite differently," said Larry Shulman, senior vice president of Hyatt Vacation Ownership.
Getting more for your money?
Shulman said with the average owner of a second home only using it for 21 to 47 days a year, fractional ownership provides a way to get more for your money without the hassle of year-round maintenance and the prospect of constantly renting out the place.
He said an important distinction between normal condominiums and fractional ownership is that the latter is "designed for use" by buyers.
"In a conventional condo project, there is a lot of investment angle to the purchasing, with people attempting to resell their units for a profit and who have no intention of actually living there," Shulman said.
He said people buy fractional properties generally because they love the place and want to vacation there on a regular basis.
"Rental income is incidental not fundamental, you could say," he said.
What is more, fractional ownership properties are developed differently than conventional condos -- a distinction that may be crucial to the Hyatt Siesta Key Resort's ability to move forward in such a distressed housing market.
"The typical condo project does involve significant presales," said Brent Virkus, president of Triton Companies, the developer. "But this isn't the type of development where you look for presales -- it's more of a usage decision by buyers. They really get interested when they see the thing come out of the ground."
Coming out of the ground these days is not a small feat.
A number of Sarasota condo projects are on ice, with several others circling the bowl. Part of the reason: Financing is extremely difficult to secure in the current environment. Lenders want to see 50 percent or more of the condo units presold before they will part with their money -- a very high bar to be met by most developers right now.
Lots of product
Wealthy buyers with money to burn can look at the Sarasota skyline and see a number of existing options. Last month as a whole, 4,600 condos were listed for sale on the Sarasota Multiple Listing Service.
So second home hunters can plunk down some cash, sign a contract, and move in next week. The problem new developers face is persuading those people to instead buy into the promise of a condo years down the road. If they cannot get enough contracts signed, they cannot get the financing to build in the first place.
The Hyatt project on Siesta Key would bypass this construction conundrum entirely -- or so the partners involved hope. That is because the majority of the construction money is coming from Wall Street.
Private equity firm The Carlyle Group, with more than $58 billion in assets worldwide, is a partner in the deal -- providing an undisclosed portion of the $100 million price tag.
New York-based real estate investment trust iStar Financial also recently signed on to a provide a $28 million loan for the project.
More money is being provided by still-undisclosed Wall Street investment banks and others, meaning the developers can simply move forward now and avoid waiting for presales.
"The money is there to make this happen," Shulman said. "We're doing it."
More like a hotel
The idea is to develop the project more like a hotel than a strictly residential property. Hotels traditionally involve lots of upfront construction costs, and take several years to become profitable.
It is a gamble that could pay off handsomely if they succeed, but wind up costing millions of dollars in losses if they do not.
Virkus said he is confident the project will be a success.
"There's always a risk to everything, but we're confident enough to put our money at stake here," he said.
While he declined to provide a specific number, Virkus said Triton's share of the cost would be "well over seven figures."
Triton did not initially plan to go the fractional ownership route.
When the project was first conceived during the boom, the white sands of Siesta Key seemed like the perfect place for upscale condominiums. Times were good -- Sarasota condos were selling like they were going out of style. But when the bottom fell out of the market, everything changed. Triton was faced with a choice: Adapt or throw in the towel.
About a year ago, Virkus said the process began to reimagine the project. No longer would traditional condos be in the mix, but instead a relatively new form of vacation residence that combines a time-share philosophy with an ownership mentality: so-called "fractional ownership."
The concept has been pioneered by several high-end chains such as Hyatt, Marriott and others who have traditionally played in the time-share game.
But what makes "fractional ownership" different is that buyers actually own a piece of their vacation property -- they hold a deed, pay property taxes and do all the traditional things homeowners do. (In traditional time-shares, a buyer might just own a membership, or sometimes nothing at all).
In fractional ownership, the buyer owns a piece of the unit. They own a quarter, an eighth, or a 12th of their unit. They can benefit from appreciation in a rising market, and get tax benefits as well. Of course, they also face the prospect of lowering values in a falling market.
Another aspect of fractional ownership has been to pull out all the stops to create multimillion-dollar residences that will whet the appetite of individuals looking to get more vacation home for their money.
'High-end product'
Architect Gary Hoyt has approached the Hyatt Siesta Key as "a very high-end product" that would aim for a peaceful, relaxed atmosphere.
"I tried to bring the beach right into the building, with a lot of very open, airy spaces," Hoyt said.
In addition to the rooms themselves, the current design calls for a beach club complete with a spa that will be partially inside and partially outside the building.
A desirable destination, and the image of exclusivity, has helped drive sales of similar projects elsewhere in the country. Hyatt has targeted retreats for the wealthy such as Aspen, Colo., where it built a 50-unit fractional ownership property that opened in December 2005.
Of course, going fractional means more buyers to sign -- in the case of the Hyatt Siesta Key, 44 units with eight owners each will mean more than 350 total buyers who must step forward.
Shulman said the partners involved in the project estimate that it will likely take at least two years, and perhaps as many as four or five years, to sell all the units. He said all involved are "in it for the long haul."
"There are various degrees of return," Shulman said. "We've looked at whether if it took two years, or perhaps four or five years, what the return would be ... and we were comfortable with those numbers."
Hyatt opened its sales office in downtown Sarasota last week. Shulman said they will start out by focusing on selling the first 11 residences, or 88 buyers, and will roll out some special incentives to help prime the pump.
Shulman said the project will try to target both ends of the geographical spectrum -- from international marketing in England and Germany, to a local push focusing on Florida residents already living within two hours of Sarasota.
"We think there's a lot for people already living in this area to like" about the project," Shulman said.
To attract local buyers, Hyatt will likely be offering complimentary access to the beach club year-round for owners, whether or not they were staying there. He said that incentive may only be available to the first round of 88 buyers, but could be extended if it proves successful.
There is also talk of offering a half unit, or three weeks instead of six, during the off-peak summer season, for a price in the $170,000 range.
The other strategy to bring in money is to rent out the unsold units. Once the resort opens in 2009, Shulman said the unsold inventory will not simply sit idle -- it will be rented out to owners of other Hyatt vacation club properties, as well as to the general public looking for a quality beach vacation resort.
He said the minimum stay for the general public has not yet been decided, but that a full-service reservations staff will be available to help match up interested parties with available rental units.
The Hyatt Siesta Key, then, will for all practical purposes resemble a beach resort hotel -- and Shulman said Hyatt hopes to achieve a 70 percent occupancy rating over the next several years while the sales process is ongoing. (Seventy percent is widely used as the target for luxury hotel properties).
This approach is not without its own double-edged potential. By opening the resort to a wide spectrum of rentals during its initial years, the money coming in will help the offset the cost of the unsold inventory. But at the same time, the aura of exclusivity could be diminished in the eyes of potential buyers.
Shulman said the Hyatt expects the building will be ready for occupancy by April 2009.
Sarasota commercial real estate broker Ian Black said the most important thing for a project like the Hyatt Siesta Key comes down to "location, location, location" -- and that a slice of beachfront property on Siesta Key certainly qualifies as a special place. Add a hefty dose of luxury and pampering, and people can be drawn to the overall lifestyle being offered.
"It's the kind of thing that works more as an emotional decision," Black said. "Do I get a great financial deal with fractional? Maybe not. But do I enjoy it and love coming here? That's what it's about."
Black himself actually owns a one-week time-share membership at a Hyatt Resort in Bonita Springs.
"It's great; I really look forward to going down there every year."
Last modified: Monday, Feb. 18, 2008 at 2 a.m.
http://www.heraldtribune.com/article/20080218/BUSINESS/802180354/1537/BUSINESS